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NextEra Energy's Shares Gain 22.7% in a Year: Should You Buy?
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NextEra Energy’s shares (NEE - Free Report) continue to rally, rising 22.7% in a year compared with its industry’s growth of 18.8%. The company also outperformed the Zacks Utilities sector in the same time frame.
The steady rise in NextEra Energy’s share prices is a reflection of the strong performance of the company and customer growth, which is boosting demand for its services.
NextEra Outperforms Industry & Sector in Past Year
Image Source: Zacks Investment Research
Factors Driving NextEra Energy Stock Higher
NextEra Energy continues to benefit from improving economic conditions in Florida. NEE’s unit Florida Power & Light Company’s (“FPL”) residential bills being 40% below the national average, provides a competitive advantage. FPL has been undergrounding power lines for years, which has increased the reliability of its services and strengthened its power distribution infrastructure. Despite the damage caused by Hurricane Debby earlier this month, the smart grid technology assisted FPL in avoiding 85,000 outages.
NextEra Energy’s unit, NextEra Energy Resources, is gaining from demand through an existing replacement cycle and a new growth cycle. Energy Resources has been replacing the higher- cost, less-efficient generation being retired in favor of low-cost renewables and battery storage. Last quarter, the company added more than 3,000 megawatts (MW) of new renewables and storage projects to its backlog, including 860 MW, which come from agreements with Google to meet its data center power demand. NextEra Energy Resources has more than 22.6 GW in renewable and storage backlog, which supports its long-term growth expectations.
NextEra Energy owns and has stakes in different pipeline projects, which provide clean-burning fuels to customers. Mountain Valley Pipeline (“MVP”) is in service now and NEE has a 31% interest in this project. The capacity for MVP remains fully subscribed under long-term, binding contracts. MVP has a capacity to carry up to 2 billion cubic feet per day of gas.
NextEra Energy’s Earnings Estimates Move Up
NextEra Energy reiterated its 2024 earnings per share in the range of $3.23-$3.43 compared with $3.17 a year ago. The Zacks Consensus Estimate for NEE’s 2024 and 2025 earnings per share indicates year-over-year growth of 6.94% and 8.34%, respectively. The company expects to increase its earnings per share in the range of 6-8% annually through 2027 from the 2024 level.
Image Source: Zacks Investment Research
NEE’s ROA Better Than Its Industry
NextEra Energy’s trailing 12-month return on assets (ROA) is 3.83%, ahead of the industry average of 2.82%. ROA is a financial ratio that measures how well a company uses its assets to generate profits. The current ROA of the company indicates that it is using its assets more efficiently than its peers.
Image Source: Zacks Investment Research
NextEra Energy’s Capital Return Program
NextEra Energy continues to increase value to its shareholders through dividend payments.
NextEra Energy plans to increase the dividend rate annually by 10%, at least through 2026 from the 2024 base, subject to its board’s approval. The current annual dividend of the company is $2.06 per share, and the dividend yield of 2.59% is better than the Zacks S&P 500 Composite’s yield of 1.56%. Check NEE’s dividend history here.
Another utility Duke Energy’s (DUK - Free Report) current annual dividend is $4.81 per share, reflecting a dividend yield of 3.71%.
NextEra’s Shares Trading at a Premium
The company is currently valued at a premium compared to its industry on a forward 12-month P/E basis.
Image Source: Zacks Investment Research
Summing Up
NextEra Energy continues with stable performance backed by rising demand for clean energy in its service territories. The reliability of its services and low electricity bills creates a competitive advantage for the company.
Given the improvement in earnings estimates and return on asset, it will be wise to remain invested in this Zacks Rank #3 (Hold) utility. NEE is trading at a premium, it is better to wait for a while and look for a better entry point.
Image: Bigstock
NextEra Energy's Shares Gain 22.7% in a Year: Should You Buy?
NextEra Energy’s shares (NEE - Free Report) continue to rally, rising 22.7% in a year compared with its industry’s growth of 18.8%. The company also outperformed the Zacks Utilities sector in the same time frame.
The steady rise in NextEra Energy’s share prices is a reflection of the strong performance of the company and customer growth, which is boosting demand for its services.
NextEra Outperforms Industry & Sector in Past Year
Image Source: Zacks Investment Research
Factors Driving NextEra Energy Stock Higher
NextEra Energy continues to benefit from improving economic conditions in Florida. NEE’s unit Florida Power & Light Company’s (“FPL”) residential bills being 40% below the national average, provides a competitive advantage. FPL has been undergrounding power lines for years, which has increased the reliability of its services and strengthened its power distribution infrastructure. Despite the damage caused by Hurricane Debby earlier this month, the smart grid technology assisted FPL in avoiding 85,000 outages.
NextEra Energy’s unit, NextEra Energy Resources, is gaining from demand through an existing replacement cycle and a new growth cycle. Energy Resources has been replacing the higher- cost, less-efficient generation being retired in favor of low-cost renewables and battery storage. Last quarter, the company added more than 3,000 megawatts (MW) of new renewables and storage projects to its backlog, including 860 MW, which come from agreements with Google to meet its data center power demand. NextEra Energy Resources has more than 22.6 GW in renewable and storage backlog, which supports its long-term growth expectations.
NextEra Energy owns and has stakes in different pipeline projects, which provide clean-burning fuels to customers. Mountain Valley Pipeline (“MVP”) is in service now and NEE has a 31% interest in this project. The capacity for MVP remains fully subscribed under long-term, binding contracts. MVP has a capacity to carry up to 2 billion cubic feet per day of gas.
NextEra Energy’s Earnings Estimates Move Up
NextEra Energy reiterated its 2024 earnings per share in the range of $3.23-$3.43 compared with $3.17 a year ago. The Zacks Consensus Estimate for NEE’s 2024 and 2025 earnings per share indicates year-over-year growth of 6.94% and 8.34%, respectively. The company expects to increase its earnings per share in the range of 6-8% annually through 2027 from the 2024 level.
Image Source: Zacks Investment Research
NEE’s ROA Better Than Its Industry
NextEra Energy’s trailing 12-month return on assets (ROA) is 3.83%, ahead of the industry average of 2.82%. ROA is a financial ratio that measures how well a company uses its assets to generate profits. The current ROA of the company indicates that it is using its assets more efficiently than its peers.
Image Source: Zacks Investment Research
NextEra Energy’s Capital Return Program
NextEra Energy continues to increase value to its shareholders through dividend payments.
NextEra Energy plans to increase the dividend rate annually by 10%, at least through 2026 from the 2024 base, subject to its board’s approval. The current annual dividend of the company is $2.06 per share, and the dividend yield of 2.59% is better than the Zacks S&P 500 Composite’s yield of 1.56%. Check NEE’s dividend history here.
Another utility Duke Energy’s (DUK - Free Report) current annual dividend is $4.81 per share, reflecting a dividend yield of 3.71%.
NextEra’s Shares Trading at a Premium
The company is currently valued at a premium compared to its industry on a forward 12-month P/E basis.
Image Source: Zacks Investment Research
Summing Up
NextEra Energy continues with stable performance backed by rising demand for clean energy in its service territories. The reliability of its services and low electricity bills creates a competitive advantage for the company.
Given the improvement in earnings estimates and return on asset, it will be wise to remain invested in this Zacks Rank #3 (Hold) utility. NEE is trading at a premium, it is better to wait for a while and look for a better entry point.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.